Can you pay off early?

[banked]

Hello,

Wondering about if we would be able to pay off early? In July we will be 3 months into Chapter 13. 100% payback. Husband has lost overtime hours at work and b/w 13 payment and mortg. pinching is tight.
We have been thinking of just pulling money from 401K to pay off 13 and be done. With just our mortgage payment we will be able to make ends meet again.

Thoughts from anyone?
I seem to get better answers here then my own attorney!!!

[frogger]

Do not pull funds from your 401K. Don't even think about it.

Pinching may be tight, but don't steal your future.

[despritfreya]

I cannot disagree with Frogger. If you can afford the Plan payment there is no need to take from your retirement.

Just want to clarify the payoff question. You are only 3 months into your case. It is too soon to be thinking about paying off the bk, even if you are paying 100%. The claims bar date has not passed therefore you do know know what the allowed claims are. You must know the allowed claims before you can pay off the Plan.

Don't rush to shut the case down. Follow the road laid out for you and see where it takes you.

Des.

[AngelinaCat]

Frogger would be the first one to say: "Patience, Grasshopper..."

And I will echo: LEAVE THE 401K ALONE!!! If you touch that, you WILL regret it. You cannot make it back up. We tried and failed. 'Hub and I are now Seasoned Citizens living 'paycheck to paycheck', or from 'hand to mouth'.

[tobee43]

wise words from those that have provided you with this advise. as smart as i thought i was we cashed in our entire 401 to pay off the bills and what a mistake that was. it's so difficult to replace those funds, if ever.

we are in our future now, and, i can't tell you how that money would have helped us more today than it did going into the pockets of the creditors.

also, i find it somewhat interesting that you would just think about this resolve at this point of your bk. if you thought you would draw out your 401 to pay off the creditors why did you wait until after you filed a 13? while i don't agree with using your 401, ours was only a band-aid, if it paid off everything i would have never filed, there would have been no reason to, if your amount is enough to have paid everyone off, why, may i ask did you want until now? (again, i don't suggest EVER using exempted funds).

[spidge]

I still regret using mine and borrowing against it too.

[159515951]

This is a bad, impulsive financial decision for so many reasons. In the short term, you're going to spend a lot more to pay off your plan, as tax penalties for early withdrawal from your 401k will be significant. In the long term, this is one of those decisions you may regret for the rest of your life.

[AngelinaCat]

Part of what we still owe the IRS is the tax penalties for cashing in 'Hub's 401K to try to keep from filing BK.

[frogger]

Frogger would be the first one to say: "Patience, Grasshopper..."

Actually, the second one to say it:

Patience, Grasshopper........

(and don't touch the exempt money!)

[keepsmiling]

Part of what we still owe the IRS is the tax penalties for cashing in 'Hub's 401K to try to keep from filing BK.

This just burns my butt. I can't even imagine how much it burns yours.
It just seems so wrong.

[banked]

Thanks all for your answers. We also agree this would just be a band-aid for the temporary fix. We are now thinking of converting to Chapter 7 if we can pass the means test. Does anyone know what this involves? As of July we now only have 2 years left on our Chapter 13 but we cant struggle for 2 more years. With our mortgage payment and our bankruptcy payment we barely pay other monthly bills, if we only have our mortgage payment we should be ok.
I appreciate your help on here everyone!!! I feel questions get answered better here than threw my attorney!!

PS I originally meant 3 years into 13 not 3 months oops.

[JJPoppy]

Hi banked, we have been exactly in your situation for the past 2 years and 4 months. Our trustee payment only replaced our 2nd mortgage payment so there was really no difference between what was coming in and what was going out after we filed. It was and has been a tooth pulling struggle ever since we filed just to make ends meet. We considered converting to a chapter 7 back in March this year as we had finally paid off the arrears on our mortgage. Our lawyer said all he had to do was fill out some paperwork and we should receive a discharge almost immediately after it was filed. He said it took a few weeks. It could be different in your area. We ended up having to stay in 13 and complete it due to some other factors.

I'd call your lawyer and ask them what your options are. We have done everything to reduce spending that we can think of. I have been couponing for 2 1/2 years, cancelled the home phone service, we rent movies from the library instead of going out, we brown bag it to lunch everyday, take advantage of promotions on fuel points at our local grocery stores, etc. Even with doing all of this it's still a struggle so I understand where you are coming from.

I hope everything works out for you and the best of luck!

[Pandora]

Have you called your lawyer and told him about income reduction? You may be able to lower your plan payment, but it depends on if you have any wiggle room to do so (secured creditors vs. unsecured).

[spidge]

What's the word banked?